M/S. PAWAN HANS LIMITED & ORS. versus AVIATION KARMACHARI SANGHATANA & ORS. on 17 January 2020

SUPREME COURT REPORTS

[2020] 1 S.C.R.

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M/S. PAWAN HANS LIMITED & ORS.

v.

AVIATION KARMACHARI SANGHATANA & ORS.

(Civil Appeal No. 353 of 2020)

BJANUARY 17, 2020

[UDAY UMESH LALIT AND INDU MALHOTRA, JJ.]

Employees’ Provident Funds and Miscellaneous ProvisionsAct, 1952 – Employees’ Provident Fund Scheme, 1952 – Benefitsunder the Pawan Hans Employees provident Fund Trust RegulationsCor under the EPF Act, 1952 and EPF Scheme, 1952 of contractualemployees of the Appellant-Company – Entitlement to – Appellant-Company framed and notified the Pawan Hans Employees ProvidentFund Trust Regulations for giving provident fund benefits to all itsregular employees – The members of the Respondent-Trade UnionDmade several representations to extend the benefit of the PF TrustRegulations since they were directly engaged by the Company oncontractual basis – The Company failed to respond to therepresentations made by the Respondent-Trade Union – Writ Petitionby the Respondent- Trade Union – The High Court directed that thebenefits under the EPF Act be extended to the members of theERespondent-Trade Union and other similarly situated employees –The Appellant-Company having framed its own PF Trust Regulations,claimed exemption from the applicability of the EPF Act and EPFScheme – On appeal, held: The Supreme Court in Regional ProvidentFund Commissioner v. Sanatan Dharam Girls Secondary SchoolFlaid down a twin test for an establishment to seek exemption fromthe provisions of the EPF Act, 1952 – The first, the establishmentmust be either ‘belonging to’ or ‘under the control of’ the Centralor the State Government – Second, the employees of such anestablishment should be entitled to the benefit of contributoryprovident fund or old age pension in accordance with any schemeGor rule framed by the Central Government or the State governmentgoverning such benefits – In the instant case, the first test is satisfiedas the Appellant- Company can be termed as a GovernmentCompany u/s. 2(45) of the Companies Act, 2013 – With respect tothe second test, the PF Trust Regulations of the Company were notH

M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARISANGHATANA & ORS.

framed by the Central or State Government, nor were they applicableto all the employees of the Company, so as to satisfy the second test– The Company did not satisfy the second test, consequently theexemption u/s. 16 of the EPF Act not applicable to the Appellant -Company – Insofar as the entitlement of the members of theRespondent-Trade Union to the benefit under the PF TrustRegulations or under the EPF Act is concerned, the members werereceiving wages/salary directly from the Company without theinvolvement of any contractor since their date of engagement andtheir work being of a perennial and continuous nature cannot betermed to be ‘Contractual’ in nature – Therefore, the members ofthe Respondent Union are entitled to the benefit of the providentfund under the PF Trust Regulations or the EPF Act – Since, the PFTrust Regulations are already in force and are applicable to allemployees of the company, the Respondent-Trade Union grantedthe benefit of provident fund under the PF Trust Regulations sothat there is uniformity in the service conditions of all the employees.

Disposing of the appeal, the Court

Conclusion

Disposing of the appeal, the Court

HELD: 1. As per Section 1(3) of the Employees’ ProvidentFunds and Miscellaneous Provisions Act, 1952, the EPF Act isapplicable to every establishment in which 20 or more personsare employed, which is either a factory engaged in any industryspecified in Schedule I, or an establishment which the CentralGovernment may by notification in the Official Gazette specify inthat behalf. Section 1(3) of the EPF Act. Section 1(3) is subject toSection 16 of the EPF Act. Sub-section (1) of Section 16 enliststhose establishments which are excluded from the applicabilityof the EPF Act. As per clause (b) of sub-section (1), anestablishment belonging to or under the control of the Centralor State Government, and whose employees are entitled to thebenefit of contributory provident fund in accordance with anyscheme or rules framed by the Central or State Governmentgoverning such benefits, is excluded from the purview of the EPFAct. [Para 6.2][741-B, C, G-H]

2. As per Section 2(45) of the Companies Act, 2013, a“Government Company” means any company in which not lessthan 51 % of the paid-up share capital is held by the CentralGovernment. Since 51% of the shares of the Appellant-Company AB

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Aare owned by the Central Government, the first test is satisfiedas the Appellant-Company can be termed as a GovernmentCompany under Section 2(45) of the Companies Act, 2013. [Para6.2][743-D-E]

3. With respect to the second test, it is relevant to noteBthat the Company had its own Scheme viz. the Pawan HansEmployees Provident Fund Trust Regulations in force. TheCompany, however, restricted the application of the PF TrustRegulations to only the ‘regular’ employees. The PF TrustRegulations of the Company were not framed by the Central orState Government, nor were they applicable to all the employeesCof the Company, so as to satisfy the second test. The RegionalProvident Fund Commissioner, Bandra issued letter dated24.05.2017 addressed to the Company wherein it was stated thatthe benefit of contributory provident fund was not being providedto contractual/casual employees of the Company; and was directed Dto implement the provisions of the EPF Act. In view of this Court,the Company does not satisfy the second test, since the membersof the Respondent-Union and other similarly situated contractualworkers were not getting the benefits of contributory providentfund under the PF Trust Regulations framed by the Company, orunder any Scheme or any rule framed by the Central GovernmentEor the State Government. Consequentially, the exemption underSection 16 of EPF Act would not be applicable to the Appellant-Company. In view of the above discussion, this Court holds thatthe Company has failed to make out a case of exclusion from theapplicability of the provisions of the EPF Act. [Para 6.2][743-E-FG; 744-D-E]

4. The next issue which arises for consideration is whetherthe members of the Respondent-Trade Union are entitled to thebenefit of Provident Fund under the PF Trust Regulations or underthe EPF Act. Clause 1.3 of the Regulations would show that theGPF Trust Regulations were made applicable to “all employees”of the Appellant-Company. Clause 2.5 of the Regulations, definesan “employee”, to include any employee who is employed forwages/salary in any kind of work, monthly or otherwise, or inconnection with the work of the Company, and who gets his wages/salary directly or indirectly from the Company. Clause 2.5 excludesH

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only a person employed by or through a contractor in connectionwith the work of the Company, and any person employed as anapprentice or trainee. In the present case, the Respondent-Unionsubmitted that even though the appointment letters refer to theemployees as ‘contractual’ employees, they were not engagedthrough any contractor. They were being paid directly by theCompany, which is evidenced from the pay-slips issued to them.It was submitted that about 250 contractual employees receivewages directly from the Company, and are eligible to be includedunder the PF Trust Regulations framed by the Company. [Para6.3][744-F-H; 745-A-B]

5. The members of the Respondent-Union have been incontinuous employment with the Company for long periods oftime. They have been receiving wages/salary directly from theCompany without the involvement of any contractor since thedate of their engagement. The work being of a perennial andcontinuous nature, the employment cannot be termed to be‘contractual’ in nature. In view of this Court, Clause 2.5 of the PFTrust Regulations would undoubtedly cover all contractualemployees who have been engaged by the Company, and drawtheir wages/salary directly or indirectly from the Company. [Para6.4][745-C-D]

6. As per Section 2(f) of the EPF Act, the definition of an‘employee’ is an inclusive definition, and is widely worded toinclude “any person” engaged either directly or indirectly inconnection with the work of an establishment, and is paid wages.In view of the above discussion, this Court finds that the membersof the Respondent-Union and all other similarly situatedcontractual employees, are entitled to the benefit of providentfund under the PF Trust Regulations or the EPF Act. Since thePF Trust Regulations are in force and are applicable to allemployees of the Company, it would be preferable to direct thatthe members of the Respondent-Union and other similarly situatedcontractual employees are granted the benefit of provident fundunder the PF Trust Regulations so that there is uniformity in theservice conditions of all the employees of the Company. [Para6.5][745-F-G]

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A8. The following directions are passed to effectuate thereliefs granted:

(i) The interests of justice would be best subserved if thebenefit of Provident Fund is provided to the members of theRespondent-Union, and other similarly situated contractualBemployees, from January 2017 when the Writ Petition was filedbefore the High Court.

(ii) Respondent No.3 - the Regional Provident FundCommissioner, Regional Office is directed to determine andcompute the amount to be deposited by the Company on the oneChand, and the members of the Respondent-Union and other similarsituated employees on the other hand. The computation wouldbe required to be made for the past period i.e. January 2017 toDecember 2019;

(iii) The Company shall be liable to pay Simple Interest @D12% p.a. on the amount payable by it towards contribution ofprovident fund for the past period, i.e., January 2017 to December2019, as per Section 7Q of the EPF Act,1952;

(iv) The statement of computation made by RespondentNo.3 will be placed before this Court within a period of 12 weeksEfrom the date of this Judgment, and thereafter the matter will belisted for issuance of necessary directions, so that the amountcan be remitted from the deposit made before this Court, directlyto the PF Trust;

(v) The employees will be obligated to deposit theirFmatching contribution for the past period i.e. January 2017 toDecember 2019, within a period of 12 weeks along with interest@ 6% p.a., after the contribution of the Company has beenremitted to the PF Trust;

(vi) With respect to the period from January 2020 onwards,the Company and the members of the Respondent-Union as alsoGother similary situated employees, will make their respectivecontributions as per the PF Trust Regulations;

(vii) The benefit shall not be extended to those employeeswho have superannuated, expired, resigned, or ceased to be inthe employment of the Company on the date of this Judgment;H

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(viii) This Court considers it appropriate to award Costs ofRs. 5,00,000 (Rupees Five Lacs) to the Respondent-Uniontowards litigation expenses incurred in the High Court and inthis Court.

(ix) After the aforesaid amounts are disbursed, the balanceamount lying deposited in this Court shall be refunded to theBAppellant-Company. [Para 8][747-E-H; 748-A-F]

Regional Provident Fund Commissioner v. SanatanDharam Girls Secondary School (2007) 1 SCC 268 :[2006] 7 Suppl. SCR 849; Shamrao Vithal Coop. BankLtd. v. Kasargode Panduranga Maliya, (1972) 4 SCC600 : [1972] 2 SCR 162 – relied on.

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Sub-Regional Provident Fund Office v. GodavariGarments Ltd., (2019) 8 SCC 149 : (2019) 2 SCC (L&S)483; M/s P.M. Patel & Sons and Ors. v. Union of Indiaand Ors (1986) 1 SCC 32 : [1985] 3 Suppl. SCR 55 –referred to.

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Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 353 of2020.

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From the Judgment and Order dated 12.09.2018 of the High Courtof Judicature at Bombay in Writ Petition No. 325 of 2017.

Ms. Pinky Anand, ASG, Puneet Taneja, Ms. Laxmi Kumari, SumitTeterwal, Advs. for the Appellants.

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P.S. Narasimha, Sr. Adv., G.R. Naik, Rahul G. Tanwani, AnanthaNarayana M.G., Siddharth, Amit Kumar Agrawal, Rajesh Kumar Sinha,RPFC-1, Mumbai, Advs. for the Respondents.

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734SUPREME COURT REPORTS

AThe Judgment of the Court was delivered byINDU MALHOTRA, J.

Leave granted.

1. The issue which arises for consideration is whether theBcontractual employees of the Appellant-Company are entitled to providentfund benefits under the Pawan Hans Employees Provident Fund TrustRegulations or under the Employees’ Provident Funds and MiscellaneousProvisions Act, 1952 (“EPF Act”) and the Employees’ Provident FundScheme, 1952 (“EPF Scheme”) framed thereunder.

C2. The background facts in which the present Civil Appeal hasbeen filed are as under :

2.1 The Company was incorporated on 15.10.1985 under theCompanies Act, 1956, and is registered as a Government ofIndia company with the Registrar of Companies, Delhi. TheDGovernment of India holds 51% shareholding in the Appellant-Company and the remaining 49% is held by Oil and NaturalGas Company Ltd. (ONGC).

The Company was incorporated with the primaryobjective of providing helicopter support services to the oilsector for its off-shore exploration operations, services inEremote and hilly areas, and charter services for promotion oftourism. It is classified as a non-scheduled operator underRule 134 of the Aircraft Rules, 1937.

2.2 On 01.04.1986, the Appellant-Company framed and notifiedthe Pawan Hans Employees Provident Fund Trust RegulationsF(hereinafter referred to as “the PF Trust Regulations”)for giving provident fund benefits to all the employees of theAppellant-Company.

Regulations 1.3 and 2.5 of the PF Trust Regulations areset out hereunder for ready reference:G“1.3 - These Regulations shall apply to all the employees ofthe Corporation.

2.5. – “Employee” means any person who is employed forwages/salary in any kind of work, monthly or otherwise, inHor in connection with the work of the Corporation and who M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARISANGHATANA & ORS. [INDU MALHOTRA, J.]

gets his wages/salary directly or indirectly from theCorporation, and excludes any person employed by orthrough a contractoror in connection with the work of theCorporation but does not include any person employed asan apprentice or trainee.”

2.3 On 26.03.1987, the Appellant-Company instituted the PawanHans Employees Provident Fund Trust (“PF Trust”) whereinthe management started depositing its share towards theprovident fund contribution with respect to employees on theregular cadre of the Company; correspondingly, the regularemployees started depositing the matching contribution withthe PF Trust.

2.4 Out of a total workforce of 840 employees, the Companyhad engaged 570 employees on regular basis, while 270employees were engaged on ‘contractual’ basis.

The Company implemented the PF Trust Regulationsonly with respect to the regular employees, even though theterm “employee” had been defined to include “any person”employed “directly or indirectly” under the PF TrustRegulations.

2.5 The Company having framed its own PF Trust Regulations,was claiming exemption from the applicability of the EPFAct and EPF Scheme under Section 16 of the EPF Act.

2.6 On 08.01.1989, the Ministry of Labour, Government of India,issued a communication to the Central Provident FundCommissioner, New Delhi, pertaining to the grant of exemptionto departmental undertakings under the control of the Central/State Government statutory bodies. The Central ProvidentFund Commissioner was directed to instruct the RegionalProvident Fund Commissioners to carefully review the casesof departmental undertakings and statutory bodies fallingunder the categories specified in Section 16(1)(b) and 16(1)(c)of the EPF Act, and take further action as indicated in thesaid letter.

Clause (iv) of the said letter dated 08.01.1989 is of relevance, andis extracted hereunder for ready reference:

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A“(iv) There may be establishments which employ large memberof casual/contingent staff, who are not entitled to the benefitof provident fund or pension. The casual/contingent staff ofsuch establishment will continue to be covered under the Act,but their regular employees who are entitled to the benefit ofprovident fund or pension should be excluded from theB”purview of the Act.

[emphasis supplied]

2.7 The Central Government, in exercise of the powers underS.1(3)(b) of the EPF Act, issued a Notification datedC22.03.2001, making the provisions of the EPF Act applicableto aircraft or airlines establishments employing 20 or morepersons, excluding aircraft or airlines establishments ownedor controlled by the Central or State Government.

The Gazette Notification No. SO 746 dated 22.03.2001D(“Notification”) is extracted for ready reference:- “ S.O. 746 – In exercise of the powers conferred by clause(b) of sub section (3) of Section 1 of the Employees ProvidentFund and Miscellaneous Provisions Act 1952 (19 of 1952),the Central Government hereby specifies the followingEestablishment employing 20 or more persons as the class ofestablishments to which the said Act shall apply with effectfrom 1[st] April 2001 namely:

(i) An establishment engaged in rendering courier services;

(ii) An establishment of aircraft or airlines other than theFaircraft airlines owned or controlled by the Central orState Government.

(iii) An establishment engaged in rendering cleaning andsweeping services.”

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The said Notification was brought into force w.e.f 01.04.2001.

2.8 Correspondingly, amendments were made to the EPF Schemeframed under Section 5 of the EPF Act. Clause 3 (b)(ci) wasinserted vide Notification No. S-35016/1/1997-SS II datedH22.07.2002, by which the EPF Scheme was made applicable M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARISANGHATANA & ORS. [INDU MALHOTRA, J.]

to aircraft or airlines establishments other than the aircraft orairlines establishments owned or controlled by the Central orState Government.

2.9 The members of the Respondent-Union made severalrepresentations on 18.09.2012, 29.09.2012, 13.03.2013,19.11.2014 to extend the benefit of the PF Trust Regulationssince they were directly engaged by the Company oncontractual basis, some of whom were working for almost20 years.

The Company failed to respond to the representations.

2.10 Being aggrieved by the inaction of the Company, theRespondent-Trade Union, filed CWP No.325 of 2017 on20.12.2016 against the Company praying for thefollowingreliefs:

“(a) A declaration that the members of theRespondent-Trade Union and other similarly situatedemployees, employed on contract basis by the Appellant-Company are entitled to the benefit of Provident Fund asper the EPF Act and the EPF Scheme, and that theAppellant-Company be directed to forthwith enrol all sucheligible contract employees under the EPF Scheme anddeposit their contribution with the Respondent No. 3-Regional Provident Fund Commissioner, Employees’Provident Fund Organisation, from the date they areeligible till remittance, and thereafter, till they are in theemployment of the Appellant-Company.

(b) Alternatively, the Appellant-Company forthwithbe directed to suitably amend the PF Trust Regulations topermit the enrolment of contract workers as members ofthe PF Trust instituted by the Appellant-Company and tomake all eligible contract employees members of the PFTrust from their respective dates of entitlement and continueto contribute amounts to the PF Trust in respect of contractemployees.”

2.11 During the pendency of the Writ Petition, the RegionalProvident Fund Commissioner, Bandra issued a letter dated24.05.2017 to the Company wherein it was stated that even AB

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Athough the EPF Act would not apply to establishments owned/controlled by the Central Government as per S.16(1)(b) and(c), however social security benefits such as provident fundmust be provided to all “employees/workers who areengaged on contractual/casual/daily wages basis” sincethere is no distinction between a person employed onBpermanent, temporary, contractual, or casual basis under S.2(f) of the EPF Act.

2.12 The High Court vide the impugned Judgment & Order dated12.09.2018 allowed the Writ Petition in terms of prayer (a),with the direction that the benefits under the EPF Act beCextended to the members of the Respondent-Trade Union,and other similarly situated employees. It was held that aliberal view must be taken in extending social security benefitsto the contractual employees. The High Court directed theCompany to enrol all eligible contractual employees underDthe EPF Scheme, and deposit their contribution withRespondent No.3 – Regional Provident Fund Commissionerfrom the date they became eligible till remittance, andthereafter till they are in employment of the Company. Thiswas to be carried out latest by 31.12.2018.

E3. Aggrieved by the impugned Judgment, the Appellant-Companyfiled the present Civil Appeal.

This Court vide Order dated 14.01.2019 issued notice and grantedstay of the impugned Judgment subject to the Company depositing asum of Rs.5,00,00,000/- (Rupees Five Crores) within 3 months in thisCourt.F

Pursuant thereto, the Company deposited the said amount on09.04.2019, which has been invested in a Fixed Deposit.

4. We have heard the learned counsel for both the parties, andhave considered the oral and written submissions made on their behalf.G4.1 Ms. Pinky Anand, learned Additional Solicitor General of India,appearing for the Appellant-Company inter alia submittedthat:

a) The Company is excluded from the applicability of theEPF Act since it neither falls under Schedule I of theH

EPF Act, nor is it covered by Notification dated 22.03.2001issued under Section 1(3)(b) of the EPF Act, since theNotification itself expressly excludes airline companies“owned or controlled by the Central Government” fromthe purview of the EPF Act.

b) The Notification 22.03.2001 was inapplicable to theAppellant-Company since Section 16(1)(b) of the EPFAct, excludes an establishment owned or controlled bythe Central Government from the scope of the EPF Act.

c) The Central Government holds 51% of the shareholdingin the Appellant-Company, and the Board of Directors ofthe Appellant-Company have been appointed by theMinistry of Civil Aviation. The Appellant-Company isgoverned by the guidelines issued by the Department ofPublic Enterprises, Government of India. The Appellant-Company is thus an establishment owned and controlledby the Central Government. Even after the EPF Actbecame applicable to the airlines industry, the Appellant-Company being an establishment owned and controlledby the Central Government, was excluded from thepurview of the EPF Act.

d) The High Court committed a grave error in givingretrospective application to the provisions of the EPF Act,i.e., from the date of the members joining the Respondent-Trade Union, given that several contractual employeeshad superannuated, passed away, resigned, or ceased tobe in the employment of the Company. The extension ofbenefits under the EPF Act to contractual employeesirrespective of their status of employment with theCompany was wholly illegal, arbitrary, and liable to be setaside.

e) The members of the Respondent-Union and other similarlysituated employees have already been paid in full theirmonthly financial benefits/emoluments. The direction ofthe High Court to the Company to contribute to theprovident fund of the contractual employees would amountto burdening the Company with twice the liability.

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A4.2 Mr. P.S. Narasimha, learned Senior Counsel appearing onbehalf of the Respondent-Union inter alia submitted that:

a) The term “employee” defined by Clause 2.5 of the PF TrustRegulations is widely defined to cover all employees, includingthose engaged on contractual basis, who are in the direct orBindirect employment of the Company. The members of theRespondent-Union are in direct employment of the Company,since they have not been engaged through any contractor.The contractual workers are paid directly as evidenced bythe pay slips issued by the Company. The benefits under thePF Trust Regulations, or the EPF Act, are required to beCprovided to even contractual employees from the date of theirjoining till the date of remittance.

b) The Company is not controlled by the Central Governmentsince its affairs are managed and controlled by a Board ofDirectors. The Company is not a company controlled by theDCentral Government.

The Notification dated 22.03.2001, specified certainestablishments including the airlines industry, other than airlinesowned or controlled by the Central or State Government, tobe covered under the EPF Act. Consequently, the CompanyEwas obligated to extend the benefits under the EPF Act to allits employees.

c) The EPF Act is a beneficial piece of legislation, which has tobe liberally construed. The denial of statutory benefits andentitlements like provident fund to the members of theFRespondent-Union is ex-facie illegal, arbitrary, discriminatoryand in violation of the provisions of the EPF Act and theConstitution of India.

5 The issue which arises for consideration in the present CivilAppeal is whether the Appellant-Company is under a statutory obligationGto provide the benefit of provident fund to its contractual employeesunder the PF Trust Regulations or the EPF Act?

If so, the date from which the aforesaid benefit is to be extendedto the contractual employees.

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6 Discussion and Analysis

6.1It is first required to be seen whether the Appellant-Companyis excluded from the applicability of the provisions of theEPF Act and the EPF Scheme framed thereunder ascontended by them.

6.2As per Section 1(3) of the EPF Act, the EPF Act isapplicable to every establishment in which 20 or morepersons are employed, which is either a factory engaged inany industry specified in Schedule I, or an establishmentwhich the Central Government may by notification in theOfficial Gazette specify in that behalf. Section 1(3) of theEPF Act reads as:

“Section.1(3) : Subject to the provisions contained in—section 16, it applies (a) to every establishment which is a factory engagedin any industry specified in Schedule I and inwhich twenty or more persons are employed, and (b) to any other establishment employing twenty or morepersons or class of such establishments which theCentral Government may, by notification in the OfficialGazette, specify in this behalf:

Provided that the Central Government may, aftergiving not less than two months’ notice of its intentionso to do, by notification in the Official Gazette, applythe provisions of this Act to any establishment employingsuch number of persons less than twenty as may bespecified in the notification.”

Section 1(3) is subject to Section 16 of the EPF Act. Sub-section(1) of Section 16 enlists those establishments which are excluded fromthe applicability of the EPF Act. As per clause (b) of sub-section (1), anestablishment belonging to or under the control of the Central or StateGovernment, and whose employees are entitled to the benefit ofcontributory provident fund in accordance with any scheme or rulesframed by the Central or State Government governing such benefits, isexcluded from the purview of the EPF Act.

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ASub-section (1) of Section 16 reads as:“Section 16. Act not to apply to certain establishment. –

(1) This Act shall not apply-

(a) to any establishment registered under the Co-operativeBSocieties Act, 1912 (2 of 1912), or under any other lawfor the time being in force in any State relating tocooperative societies employing less than fifty personsand working without the aid of power; or (b) to any other establishment belonging to or under theCcontrol of the Central Government or a State Governmentand whose employees are entitled to the benefit ofcontributory provident fund or old age pension inaccordance with any Scheme or rule framed by the CentralGovernment or the State Government governing suchbenefits; or D

(c) To any other establishment set up under any Central,Provincial or State Act and whose employees are entitledto the benefits of contributory provident fund or old agepension in accordance with any scheme or rule framedunder that Act governing such benefits;E

(2) If the Central Government is of opinion that having regardto the financial position of any class of establishment orother circumstances of the case, it is necessary orexpedient so to do, it may, by notification in the OfficialGazette, and subject to such conditions, as may beFspecified in the notification, exempt, whether prospectivelyor retrospectively, that class of establishments from theoperation of this Act for such period as may be specifiedin the notification.”

GThis Court in Regional Provident Fund Commissioner v. SanatanDharam Girls Secondary School[1]laid down a twin-test for anestablishment to seek exemption from the provisions of the EPF Act,1952. The twin conditions are:

H1 (2007) 1 SCC 268 : (2007) 1 SCC (L&S) 167

First, the establishment must be either ‘‘belonging to” or “underthe control of” the Central or the State Government. The phrase“belonging to” would signify “ownership” of the Government, whereasthe phrase “under the control of” would imply superintendence,management or authority to direct, restrict or regulate.[2]

Second, the employees of such an establishment should be entitledto the benefit of contributory provident fund or old age pension inaccordance with any scheme or rule framed by the Central Governmentor the State Government governing such benefits.

If both tests are satisfied, an establishment can claim exemption/exclusion under Section 16(1)(b) of the EPF Act.

Applying the first test to the instant case, the Central Governmenthas a 51% ownership in the Appellant-Company, while the balance 49%is owned by the ONGC, a Central Government PSU.

As per Section 2(45) of the Companies Act, 2013, a “GovernmentCompany” means any company in which not less than 51 % of the paid-up share capital is held by the Central Government. Since 51% of theshares of the Appellant-Company are owned by the Central Government,the first test is satisfied as the Appellant-Company can be termed as aGovernment Company under Section 2(45) of the Companies Act, 2013.

With respect to the second test, it is relevant to note that theCompany had its own Scheme viz. the Pawan Hans Employees ProvidentFund Trust Regulations in force. The Company however restricted theapplication of the PF Trust Regulations to only the ‘regular’ employees.The PF Trust Regulations of the Company were not framed by the Centralor State Government, nor were they applicable to all the employees ofthe Company, so as to satisfy the second test.

The Regional Provident Fund Commissioner, Bandra issued letterdated 24.05.2017 addressed to the Company wherein it was stated thatthe benefit of contributory provident fund was not being provided tocontractual/casual employees of the Company; and was directed toimplement the provisions of the EPF Act.

The relevant extract from the letter is set out hereinbelow:

2 Shamrao Vithal Coop. Bank Ltd. v. Kasargode Panduranga Maliya, (1972) 4 SCC600

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“Aapproximately 370-400 employees have been engaged byM/s Pawan Hans Ltd. on contract basis in various cadres.But no social security benefit is being extended to them.TheEPF & MP Act, 1952 under Section 2(f) lays down that anyperson employed for wages in any kind of work in or inconnection with the work of the establishment and includes aBworker engaged by or through a contractor. There is nodistinction between a person employed on permanent,temporary, contractual or casual basis under Section 2(f) ofthe EPF & MP Act, 1952.

You are therefore, requested to implement the provisionsof the EPF & MP Act, 1952 in respect of all the contractual/causal employees engaged by M/s Pawan Hans Ltd. who arestill not getting benefits of PF and Pension.”

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DIn our view, the Company does not satisfy the second test, sincethe members of the Respondent-Union and other similarly situatedcontractual workers were not getting the benefits of contributory providentfund under the PF Trust Regulations framed by the Company, or underany Scheme or any rule framed by the Central Government or the StateGovernment. Consequentially, the exemption under Section 16 of EPFEAct would not be applicable to the Appellant-Company.

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In view of the above discussion, we hold that the Company hasfailed to make out a case of exclusion from the applicability of theprovisions of the EPF Act.

6.3 The next issue which arises for consideration is whether themembers of the Respondent-Trade Union are entitled to the benefit ofProvident Fund under the PF Trust Regulations or under the EPF Act.

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Clause 1.3 of the Regulations would show that the PF TrustRegulations were made applicable to“all employees”of the Appellant-Company.G

Clause 2.5 of the Regulations, defines an “employee”, to includeany employeewho is employed for wages/salary in any kind of work,monthly or otherwise, or in connection with the work of the Company,and who gets his wages/salarydirectly or indirectlyfrom the Company.Clause 2.5 excludes only a person employed by or through a contractorH

in connection with the work of the Company, and any person employedas an apprentice or trainee.

In the present case, the Respondent-Union submitted that eventhough the appointment letters refer to the employees as ‘contractual’employees, they were not engaged through any contractor. They werebeing paid directly by the Company, which is evidenced from the pay-slips issued to them. It was submitted that about 250 contractual employeesreceive wages directly from the Company, and are eligible to be includedunder the PF Trust Regulations framed by the Company.

6.4 We find that the members of the Respondent-Union have beenin continuous employment with the Company for long periods of time.They have been receiving wages/salary directly from the Companywithout the involvement of any contractor since the date of theirengagement. The work being of a perennial and continuous nature, theemployment cannot be termed to be ‘contractual’ in nature.

In our considered view, Clause 2.5 of the PF Trust Regulationswould undoubtedly cover all contractual employees who have beenengaged by the Company, and draw their wages/salary directly orindirectly from the Company.

6.5 As per Section 2(f) of the EPF Act, the definition of an‘employee’ is an inclusive definition, and is widely worded to include“any person” engaged either directly or indirectly in connection with thework of an establishment, and is paid wages.[3]

In view of the above discussion, we find that the members of theRespondent-Union and all other similarly situated contractual employees,are entitled to the benefit of provident fund under the PF Trust Regulationsor the EPF Act. Since the PF Trust Regulations are in force and areapplicable to all employees of the Company, it would be preferable todirect that the members of the Respondent-Union and other similarlysituated contractual employees are granted the benefit of provident fundunder the PF Trust Regulations so that there is uniformity in the serviceconditions of all the employees of the Company.

6.6 The question which now arises is the date from which thebenefit of provident fund is to be extended to the contractual employees.

3 Sub-Regional Provident Fund Office v. Godavari Garments Ltd., (2019) 8 SCC 149 :(2019) 2 SCC (L&S) 483; M/s P.M. Patel & Sons and Ors. v. Union of India and Ors (1986) 1 SCC 32.

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AThis Court vide Order dated 24.10.2019 had passed the followingOrder:

“Provident Fund is normally managed on actuarial basis; thecontributions received from employer and the employee areinvested and the income by way of interest forms the substantialBfund through which any pay-out is made. For all these yearsthe Fund in question was subsisting on contributions madeby the other employees and, if at this stage, the benefit interms of the judgment of the High Court is extended withretrospective effect, it may create imbalance. Those who hadnever contributed at any stage would now be members of theCfund. The fund never had any advantage of their contributionsand yet the fund would be required to bear the burden incase any pay-out is to be made. Even if concerned employeesare directed to make good contributions with respect toprevious years with equivalent matching contribution fromDthe employer, the fund would still be deprived of the interestincome for past several years in respect of such contributions.

In order to have clear perspective in the matter and tosee if there could be any solution to the problem as posedabove, we call upon the petitioner to depute a person who isEwell versed in the matter and who has been managing theProvident Fund Scheme of Pawan Hans Limited to have adialogue with the respondent No.3 before 15.11.2019 (arepresentative of the respondent(s) is also at liberty to remainpresent during such discussion) so that a workable solutioncould then be presented by such person and the representativeFof respondent No.3 before us on the next occasion.

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List the matter on 29.11.2019 at 10.30 a.m.”

6.7 The learned ASG submitted that no workable solution couldbe worked out at the meeting held between the representative of theGAppellant-Company, Respondent No.3, and the representative of theRespondent-Union. The learned ASG however offered that the Appellant-Company was willing to extend the benefit under the PF Trust Regulationsto the members of the Respondent-Union and other similarly situatedemployees, from the date of the impugned Judgment.

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6.8 Respondent No.3 – the Regional Provident Fund Commissionersubmitted that since the Company had remained out of the purview ofthe EPF Act, the direction to deposit contribution from the date ofeligibility of the contractual employees till the date of remittance was notworkable, and could not be sustained.

7. After hearing the parties at length, and in light of the peculiarfacts and circumstances of this case, we affirm the Judgment & Orderdated 12.09.2018 passed by the Bombay High Court in W.P.No.325/2017 holding that members of the Respondent-Union are covered by theEPF Act. However, we modify the direction of the High Court to grantthe benefits under the EPF Act, and direct that the members of theRespondent-Union and other similarly situated contractual employeesbe enrolled under the Pawan Hans Employees Provident Fund TrustRegulations so that there is uniformity in the conditions of service of allemployees of the Appellant-Company.

Furthermore, the direction of the High Court to pay the contributionfrom the date of their eligibility till the date of remittance is also modifiedin terms of the directions given in this Judgment.

8. We pass the following directions to effectuate the reliefsgranted:

(i) The interests of justice would be best subserved if the benefitof Provident Fund is provided to the members of theRespondent-Union, and other similarly situated contractualemployees, from January 2017 when the Writ Petition wasfiled before the High Court.

(ii) Respondent No.3 - the Regional Provident FundCommissioner, Regional Office, Bhavishya Nidhi Bhawan,341 Bandra (E), Mumbai is directed to determine andcompute the amount to be deposited by the Company onthe one hand, and the members of the Respondent-Unionand other similar situated employees on the other hand. Thecomputation would be required to be made for the pastperiod i.e. January 2017 to December 2019;

(iii) The Company shall be liable to pay Simple Interest @ 12%p.a. on the amount payable by it towards contribution ofprovident fund for the past period, i.e., January 2017 toDecember 2019, as per Section 7Q of the EPF Act,1952 ; A

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748SUPREME COURT REPORTS

A(iv)The statement of computation made by Respondent No.3will be placed before this Court within a period of 12 weeksfrom the date of this Judgment, and thereafter the matterwill be listed for issuance of necessary directions, so thatthe amount can be remitted from the deposit made beforethis Court, directly to the PF Trust;B

(v) The employees will be obligated to deposit their matchingcontribution for the past period i.e. January 2017 toDecember 2019, within a period of 12 weeks along withinterest @ 6% p.a., after the contribution of the Companyhas been remitted to the PF Trust; C

(vi) With respect to the period from January 2020 onwards, theCompany and the members of the Respondent-Union asalso other similary situated employees, will make theirrespective contributions as per the PF Trust Regulations; D(vii)The benefit shall not be extended to those employees whohave superannuated, expired, resigned, or ceased to be inthe employment of the Company on the date of thisJudgment ;

(viii) We consider it appropriate to award Costs of Rs.5,00,000E(Rupees Five Lacs) to the Respondent-Union towardslitigation expenses incurred in the High Court and in thisCourt.

(ix) After the aforesaid amounts are disbursed, the balanceamount lying deposited in this Court shall be refunded toFthe Appellant-Company.The present civil appeal along with all pending applications, if any,stand disposed of.

Ordered accordingly.

GAnkit Gyan

Appeal disposed of.

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